An employee put in years of service with your company, or is an exemplary worker, but circumstances now lead to his or her departure. You have agreed to pay the employee severance, but you want him or her to receive the full amount, with no taxes taken out. To accomplish this, you will need to do a "gross-up."
Although there is no legal requirement to offer severance, many companies provide it to employees after their employment is terminated. In general, severance pay is based on length of employment. You may decide to offer a week's pay for every year of service, or a flat amount based on six weeks' pay. When provided, it's given either as a lump sum or paid over a number of weeks.
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